A seller’s market is a market condition in which there are more buyers in the market than sellers, this results in pricing power for the seller. A seller’s market occurs when low supply meets high demand, often resulting in home price increases which benefit the seller. Let’s look at the St. Louis market in 2020:
- Both median and average sales price have increased in 2020 over 2019
- For the year, we saw homes sell for 99.4% of the list price, in Aug-Oct 2020 we saw the sales price exceed 100% in which homes were selling for over list price
- Inventory of homes available is at an 15 year low:
- In 2018, there was an average of 4,459 residential homes (excludes condos/townhouse), in 2020 that average was 2,413
- Expressed in months supply of inventory we are 1.3. Less than 4 months indicates seller’s market, over 6 months indicates buyer’s market
Here’s is what you can do if you are buyer in a seller’s market:
- Be ready to move fast – when homes come on the market, be ready to get out and see them ASAP. Some seller’s agents are allowing for multiple offers by listing towards the end of the week, allowing the weekend to pass and for responses due on Monday or Tuesday in order to review all offers.
- Make your best offer up front – Be ready to make an offer and make it your best offer up front. This is not the time for counter offers, if your offer is lower, they may simply go with another offer.
- Put more skin in the game – putting a higher earnest money deposit will show the sellers you are serious.
- Its not all just about money – other factors like closing date may be important to the sellers, working with a skilled real estate agent can help you determine these factors to write your best offer.
- Keep it simple the less contingencies the better – Contingencies are opportunities for the transaction to fall apart, so a seller will be drawn to offers with few or no contingencies. Caution, don’t put yourself at a risk you are not willing to take.
- Include pre-approval (not pre-qualification) and proof of funds to show you are a well qualified buyer.
- Consider an escalation clause that will beat any other offers, by say $1,000. Careful consideration should be used with escalation clauses and working with a skilled real estate agent can help discuss advantages, pitfalls and ways to protect you from paying too much.
No more letters to the seller – in a tough buyer’s market, we all want our offer to stand out amongst the crowd and often buyers have resorted to a “love letter” to the seller on why their offer should be picked. These letters pose federal Fair Housing Act risks. Sellers should make the decision to accept or reject an offer based on objective criteria only – having additional information from a buyer letter that may indicate familial status, religion, gender, etc. opens risks to the seller on why one offer was chosen over the other.
Now is the time to have a skilled agent partnering with you to help navigate this seller’s market. Reach out and we can discuss how I can help.